Under pressure at FERC for buying such a large chunk (40%) ofthe firm transportation capacity to California on El Paso NaturalGas, NGC Corp. announced late yesterday it is releasing 593,122MMBtu/d, or about 40% of the capacity it holds on the pipeline fora one-month term. It is the first quantity of transportationcapacity NGC has released since its negotiated contract with ElPaso became effective Jan. 1 and may appear to be a response toprotesters who have accused the marketing firm of withholdingwestbound capacity in order to prop up capacity prices. “It’spressure from the hearings at FERC last month,” said one observer.A spokeswoman had no comment on why the firm was releasing thecapacity. Demand remains strong in California despite the start ofa shoulder month. “Our goal is not to corner the market but ratherto use what we can,” one NGC marketer said cryptically.

NGC’s $700 million contracts give it right to 1.3 Bcf/d ofcapacity for two years. But the company is only obligated to payreservation rates (12 cents/Dth plus fuel) on 50% of the capacityin the first year of the deal and 72% in the second year. Thecurrent price difference between Southern California and the SanJuan Basin is about 34 cents, making the deal appear quitelucrative if NGC is able to access San Juan Basin production. “Thatcould be 10-cents of margin they’re walking away from if they don’tget a premium on [the capacity] they paid for,” said one observer.

NGC is offering to release the capacity for about 34 cents/Dth.The winning bidder has a choice of primary receipt points in theSan Juan, Anadarko or Permian basins and a primary delivery pointof Topock, AZ, at a connection with Pacific Gas & Electric Co.intrastate pipeline. The quantity has been posted on El Paso’sbulletin board and will be available to the winning bidder in onepackage on a monthly term.

A story titled “NGC Releases First Batch of El Paso Capacity” inthe Tuesday April 7 edition of NGI’s Daily Gas Price Index mentionedonly one of two El Paso capacity packages being released by NGCCorp. NGC is releasing the 593,122 MMBtu/d firm capacity packagethrough the end of April, but also is releasing the same quantity withthe same delivery and receipt points for a much longer term: May 1through December 31, 1999, which is the end of the contract term forNGC.

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